<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1999
-------------
Commission File Number 0-17401
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OPTIMUMCARE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant specified in its charter)
Delaware 33-0218003
- ------------------------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30011 Ivy Glenn Drive, Ste 219
Laguna Niguel, CA 92677
- --------------------------------------------------- --------
Address of Registrant's Principal Executive Offices Zip Code
(949) 495-1100
- --------------------------------------------------------------------------------
(Registrants telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Number of Shares Outstanding
- ----------------------------- ----------------------------
Common Stock, $.001 par value 5,919,897
<PAGE> 2
INDEX
OPTIMUMCARE CORPORATION
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets as of June 30, 1999 and 3
December 31, 1998
Statements of Income for the Three Months and 4
Six Months Ended June 30, 1999 and 1998
Statements of Cash Flows for the Three Months 5
and Six Months Ended June 30, 1999 and 1998
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures 9
about Market Risk
PART II OTHER INFORMATION 10
SIGNATURE 11
2
<PAGE> 3
OPTIMUMCARE CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
--------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $ 137,841 $ 188,636
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE OF $0 AT
JUNE 30,1999 AND DECEMBER 31, 1998 2,727,712 2,293,583
NOTE RECEIVABLE FROM OFFICER 78,000 78,000
PREPAID EXPENSES 38,899 71,537
DEFERRED TAX ASSET 34,712 20,288
---------- ----------
TOTAL CURRENT ASSETS 3,017,164 2,652,044
NOTES RECEIVABLE FROM OFFICER 314,070 314,070
FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $153,154 AT JUNE 30, 1999
AND $131,062 AT DECEMBER 31, 1998 47,602 59,527
DEFERRED TAX ASSET 68,235 75,817
OTHER ASSETS 52,825 53,286
---------- ----------
TOTAL ASSETS $3,499,896 $3,154,744
========== ==========
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 247,631 $ 244,525
ACCRUED VACATION 74,595 50,720
ACCRUED EXPENSES 233,580 134,130
---------- ----------
TOTAL CURRENT LIABILITIES 555,806 429,375
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 5,919,897 SHARES ISSUED,
AND OUTSTANDING AT JUNE 30, 1999,
AND DECEMBER 31,1998 5,920 5,920
PAID-IN-CAPITAL 2,431,761 2,431,761
RETAINED EARNINGS 506,409 287,688
---------- ----------
TOTAL STOCKHOLDERS' EQUITY $2,944,090 $2,725,369
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,499,896 $3,154,744
========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE> 4
OPTIMUMCARE CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JUNE 30 JUNE 30 JUNE 30 JUNE 30
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $2,698,476 $2,935,099 $5,196,234 $6,127,928
INTEREST INCOME 8,786 5,994 18,426 12,064
---------- ---------- ---------- ----------
$2,707,262 $2,941,093 $5,214,660 $6,139,992
---------- ---------- ---------- ----------
OPERATING EXPENSES:
COSTS OF SERVICES PROVIDED 2,020,235 $2,213,908 $4,063,957 $4,632,806
PROVISION FOR DOUBTFUL ACCOUNTS 0 0 0 302,079
GENERAL AND ADMINISTRATIVE 406,602 436,819 778,106 810,127
INTEREST 40 0 1,322 2,306
---------- ---------- ---------- ----------
2,426,877 2,650,727 4,843,385 5,747,318
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 280,385 290,366 371,275 392,674
INCOME TAXES 128,375 113,850 152,554 158,670
---------- ---------- ---------- ----------
NET INCOME $ 152,010 $ 176,516 $ 218,721 $ 234,004
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.03 $ 0.03 $ 0.04 $ 0.03
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE $ 0.03 $ 0.03 $ 0.04 $ 0.03
========== ========== ========== ==========
</TABLE>
See notes to financial statements
4
<PAGE> 5
OPTIMUMCARE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDING
-------------------------
JUNE 30 JUNE 30
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 218,721 $ 234,004
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & Amortization 22,092 20,459
Provision for Doubtful Accounts 0 302,079
Deferred taxes (6,842) 334,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable, net (434,129) (347,941)
(Increase) in prepaid income taxes 0 (216,861)
Decrease in prepaid expenses 32,638 1,481
Decrease in other assets 461 0
Increase/(Decrease) in accounts payable 3,106 (17,888)
Increase in accrued vacation 23,875 13,859
Increase/(Decrease) in accrued liabilities 99,450 (1,664)
--------- ---------
CASH AND CASH EQUIVALENTS (USED)/PROVIDED
BY OPERATING ACTIVITIES (40,628) 321,528
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of furniture & equipment (10,167) (5,410)
--------- ---------
CASH AND CASH EQUIVALENTS (USED)
IN INVESTING ACTIVITIES (10,167) (5,410)
CASH FLOW FROM FINANCING ACTIVITIES
Note payable from bank proceeds 250,000 0
Note payable from bank paydowns (250,000) (200,000)
Purchase of treasury stock 0 (76,755)
--------- ---------
CASH AND CASH EQUIVALENTS (USED) BY
FINANCING ACTIVITIES 0 (276,755)
(DECREASE) IN CASH AND CASH EQUIVALENTS (50,795) 39,363
Cash and cash equivalents at beginning of period 188,636 945,404
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 137,841 $ 984,767
========= =========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
OPTIMUMCARE CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three month period ended
June 30, 1999 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 1999 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Form 10-K for the year ended December 31, 1998.
NOTE B -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- ------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Numerator $ 152,010 $ 176,516 $ 218,721 $ 234,004
Denominator:
Denominator for basic earnings
per share - weighted-average
shares 5,919,897 6,882,967 5,919,897 6,892,735
Dilutive employee stock options
145,959 163,215 84,772 207,336
Denominator for diluted
earnings per share 6,065,856 7,046,182 6,004,669 7,100,071
Basic earnings per share $ .03 $ .03 $ .04 $ .03
Diluted earnings per share
$ .03 $ .03 $ .04 $ .03
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains statements which are forward-looking in time and involve
risks and uncertainties, including the risks associated with plans, the effects
of changing economic and competitive conditions, government regulation which may
affect facilities, licensing, healthcare reform which may affect payment amounts
and timing, availability of sufficient working capital, Program development
efforts and timing and market acceptance of new Programs which may affect future
sales growth and/or costs of operations.
MATERIAL CHANGES IN FINANCIAL CONDITION
At June 30, 1999 and December 31, 1998, the Company's working capital was
$2,461,358 and $2,222,669 respectively. The nature of the Company's business
requires significant working capital to fund operations of its programs as well
as to fund corporate expenditures until receivables can be collected. Moreover,
because each of the existing contracts represents a significant portion of the
Company's business, the inability to collect any of the accounts receivable
could materially and adversely affect the Company's liquidity. The Company's
working capital at June 30, 1999 has increased over December 31, 1998 primarily
due to an increase in one account receivable. This is due to an increase in the
age of one program receivable by approximately 30 days. The Company believes
that this is a temporary cash flow delay and is not indicative of an ultimate
collection problem with this account.
Cash flows from operations were ($40,628) and $321,528 for the periods ended
June 30, 1999 and 1998, respectively. Funds used during the current period were
primarily due to financing the increase in accounts receivable from the one
program, discussed above.
Cash flows used in investing activities were ($10,167) and ($5,410) for the
periods ended June 30, 1999 and 1998, respectively. Funds used during both
periods were expended for office furniture and equipment.
$250,000 was drawn and repaid under the Company's line of credit during the
period ended June 30, 1999. The cash used in financing activities was ($276,755)
for the period ended June 30, 1998. Funds used during 1998 were pay downs on the
Company's line of credit agreement with a bank, which were drawn during 1997.
The line of credit expires May 1, 2000. The maximum indebtedness is $1,500,000.
Amounts allowable for draw are based on 75% of certain qualified accounts
receivable. As of July 23, 1999, approximately $1,434,820 is available for
future draws on the line of credit agreement. It is expected that the line of
credit will be renewed on similar terms. The Company's principal sources of
liquidity for the fiscal year 1999 are cash on hand, accounts receivable, the
line of credit with a bank and continuing revenues from programs.
7
<PAGE> 8
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 compared to Three Months Ended June 30, 1998
The Company operated ten (10) programs during the three months ended June 30,
1999 and twelve (12) programs during the three months ended June 30, 1998. Net
Revenues were $2,698,476 and $2,935,099 for the three months ended June 30, 1999
and 1998, respectively. The decrease in revenues for the three months ended June
30, 1999 over June 30, 1998 is partially due to the decrease in the number of
operational programs. In addition, revenues were higher in 1998 due to a
particularly high census and increased collections in patient revenues at one
program during the second quarter of 1998, which program was modified to a flat
monthly fee in 1999.
Cost of services provided were $2,020,235 and $2,213,908 for the three months
ended June 30, 1999 and 1998 respectively. Costs have decreased proportionate to
the decrease in net revenues among periods.
The provision for doubtful accounts at June 30, 1999 represents the write-off of
the receivables generated from an alliance with one entity during the period
ending June 30, 1998. No such similar situation existed during the period ending
June 30, 1999.
Selling, general and administrative expenses for the three months ending June
30, 1999 have decreased over the three months ending June 30, 1998 due to a
decrease in legal fees incurred in connection with protecting the Company's
trade name against use by an East Coast Healthcare Provider, during 1998.
Net income was $152,010 and $176,516 for the three months ended June 30, 1999
and 1998, respectively. The decrease in net income is attributable to lower
revenues partially offset by lower costs of services provided.
The Company anticipates the costs of operating its current programs to remain
similar to prior periods. Revenues are expected to increase as new programs are
opened and all programs are generating revenue. The Company is actively pursuing
the formation of its own Community Mental Health Centers to host certain of its
partial hospitalization programs. This is a natural progression which has
stemmed from the Company continually providing a larger scope of services to its
customers for a greater management fee.
An increase in revenues should cause gross profit to rise favorably and
disproportionately to the increase in costs for such programs. However, should
patient census and the resulting revenue decrease (especially below the minimum
break even level), costs could be disproportionately high, which would adversely
impact the results of operations. Due to the Company's dependence on a
relatively small customer base presently consisting of five (5) hospitals and
one community mental health center, the loss of any of its customers could have
a significant adverse effect on the Company's operations.
The Company upgraded its general ledger accounting system to be year 2000
compliant effective January 1, 1999. The cost of addressing the year 2000 issues
approximated $2,500 and was not material to the Company's financial position,
operating results or cash flows. However, it does appear that the year 2000 is a
major concern for the Company's host hospitals and the various insurance
companies from which the hospitals receive reimbursements. The large volume,
small dollar transactions processed by these entities= computer systems would
most likely require reconfiguration to accommodate the year 2000. The trickle
down effect of this situation to the Company is not known at this point in time.
8
<PAGE> 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Immaterial.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 TO SIX MONTHS ENDED JUNE 30,
1998
Net revenues decreased approximately 15% for the six months ended June 30, 1999
over the comparable six months ended June 30, 1998.
The Company had ten (10) operational Programs during the six month period ended
June 30, 1999 and twelve (12) operational programs during the six month period
ended June 30, 1998. The decrease in net revenues among comparative periods is
due to the decrease in the number of operational programs which decrease was
partially offset by increased census at other programs.
Cost of services provided decreased approximately 12% for the six months ended
June 30, 1999 over the comparable six months ended June 30, 1998. This decrease
is directly attributable to the decrease in revenues among periods.
The provision for doubtful accounts at June 30, 1998 represents the write-offs
of receivables generated from an alliance with one entity during the first
quarter of 1998. No such similar situation existed during the six month period
ending June 30, 1999.
General and administrative expenses remained fairly constant in the aggregate
between such periods.
9
<PAGE> 10
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
10.115 Change in Terms Agreement between the Company and Southern
California Bank dated April 27, 1999.
10.116 Lease Agreement between the Company and Laguna Niguel Office
Center dated May 12, 1999 which supersedes the lease dated
June 23, 1988.
27 Financial Data Schedule
10
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
OPTIMUMCARE CORPORATION
A Delaware Corporation
Dated: August 3, 1999 By: /s/ EDWARD A. JOHNSON
-----------------------------
Edward A. Johnson
Chairman of the Board
& Principal Financial Officer
11
<PAGE> 12
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.115 Change in Terms Agreement between the Company and Southern
California Bank dated April 27, 1999.
10.116 Lease Agreement between the Company and Laguna Niguel Office
Center dated May 12, 1999 which supersedes the lease dated
June 23, 1988.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.115
SOUTHERN CALIFORNIA BANK
Member FDIC
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
==================================================================================================================
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 05-01-2000 4000928 50 5015 382
- ------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the Applicability of this document to
any particular loan or item.
==================================================================================================================
</TABLE>
<TABLE>
<S> <C>
Borrower: OPTIMUMCARE CORPORATION (TIN: 33-0218003) Lender: SOUTHERN CALIFORNIA BANK
30011 IVY GLENN DRIVE #219 ORANGE COUNTY CORPORATE BANKING
LAGUNA NIGUEL, CA 92677 P.O. BOX 588
LA MIRADA, CA 90637
==================================================================================================================
</TABLE>
PRINCIPAL AMOUNT: $1,500,000.00 DATE OF AGREEMENT: APRIL 27, 1999
DESCRIPTION OF EXISTING INDEBTEDNESS.
- - Promissory Note dated April 14, 1995 in the original amount of $500,000.00.
- - Change in Terms Agreement dated May 6, 1996 extending the maturity date to
July 1, 1996.
- - Change in Terms Agreement dated August 1, 1996 increasing the principal amount
to $750,000.00 and extending the maturity date to March 1, 1997.
- - Change in Terms Agreement dated January 28, 1997, extending the maturity
date to June 1, 1997.
- - Change in Terms Agreement dated May 15, 1997, increasing the principal amount
to $1,500,000.00 and extending the maturity date to May 1, 1998.
- - Change in Terms Agreement dated May 1, 1998 extending the maturity date to
June 15, 1998.
- - And Change in Terms Agreement dated May 27, 1998, extending the maturity date
to May 1, 1999.
DESCRIPTION OF COLLATERAL.
- - All Inventory, Chattel Paper, Accounts, Equipment, General Intangibles and
Fixtures.
DESCRIPTION OF CHANGE IN TERMS.
- - Maturity date shall be extended from May 1, 1999 to May 1, 2000.
- - Interest shall accrue at Wall Street Journal Prime Rate + 0.50% and computed
on a 365/360 basis.
DESCRIPTION OF CHANGE IN LOAN AGREEMENT/COVENANTS.
- - Advances to Shareholders/Officers not to exceed $392,000.00.
PROMISE TO PAY. OPTIMUMCARE CORPORATION ("BORROWER") PROMISES TO PAY TO SOUTHERN
CALIFORNIA BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF ONE MILLION FIVE HUNDRED THOUSAND & 00/100
DOLLARS ($1,500,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST
ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN ONE
PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON MAY 1,
2000. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID
INTEREST BEGINNING JUNE 1, 1999, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON
THE SAME DAY OF EACH MONTH AFTER THAT. The annual interest rate for this
Agreement is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount of any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an independent index which is the WALL
STREET JOURNAL PRIME RATE (the "Index"). The Index is not necessarily the lowest
rate charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notice to
Borrower. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates as
well. The interest rate change will not occur more often than each DAY. THE
INDEX CURRENTLY IS 7.750%. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS AGREEMENT WILL BE AT A RATE OF 0.500 PERCENTAGE POINTS
OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250%. NOTICE: Under no
circumstances will the interest rate on this Agreement be more than the maximum
rate allowed by applicable law.
1
<PAGE> 2
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Agreement, Borrower understands that Lender is entitled
to a MINIMUM INTEREST CHARGE OF $250.00. Other than Borrower's obligation to pay
any minimum interest charge, Borrower may pay without penalty all or a portion
of the amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments of accrued unpaid interest. Rather, they will reduce
the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $5.00, WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Agreement. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Lender
in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon Borrower's failure
to pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also , if permitted under
applicable law, increase the variable interest rate on this Agreement to 5.500
percentage points over the Index. Lender may hire or pay someone else to help
collect this Agreement if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower also
will pay any court costs, in addition to all other sums provided by law. THIS
AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF
CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF ORANGE COUNTY, THE STATE OF
CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST
THE OTHER. SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $16.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SET OFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or set off all sums owing on this Agreement against any and all such accounts.
2
<PAGE> 3
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested only in writing by Borrower or by an
authorized person. All communications, instructions, or directions by telephone
or otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: EDWARD A. JOHNSON, PRESIDENT.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
Lender's internal records, including daily computer print-outs. Lender will have
no obligation to advance funds under this Agreement if: (a) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Agreement for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Agreement
or any other agreement between Lender and Borrower.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation contract
and tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association, upon request of either party. No act to take or dispose
of any collateral securing this Agreement shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code. Any disputes, claims, or controversies concerning the
lawfulness or reasonableness of any act, or exercise of any right, concerning
any collateral securing this Agreement, including any claim to rescind, reform,
or otherwise modify any agreement relating to the collateral securing this
Agreement, shall also be arbitrated, provided however that no arbitrator shall
have the right or the power to enjoin or restrain any act of any party. Lender
and Borrower agree that in the event of an action for judicial foreclosure
pursuant to California Code of Civil Procedure Section 726, or any similar
provision in any other state, the commencement of such an action will not
constitute a waiver of the right to arbitrate and the court shall refer to
arbitration as much of such action, including counterclaims, as lawfully may be
referred to arbitration. Judgment upon any award rendered by any arbitrator may
be entered in any court having jurisdiction. Nothing in this Agreement shall
preclude any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar
doctrines which would otherwise be applicable in an action brought by a party
shall be applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for these
purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
3
<PAGE> 4
MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Agreement on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Agreement without
losing them. Borrower and any other person who signs, guarantees or endorses
this Agreement, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs
this Agreement, whether as maker, guarantor, accommodation maker or endorser,
shall be released from liability. All such parties agree that Lender may renew
or extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED
COPY OF THE AGREEMENT.
BORROWER:
OPTIMUMCARE CORPORATION
BY: EDWARD A JOHNSON
---------------------------
EDWARD A JOHNSON, PRESIDENT
4
<PAGE> 5
SOUTHERN CALIFORNIA BANK
Member FDIC
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
===================================================================================================================
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 05-01-2000 4000928 50 5015 382
- -------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
===================================================================================================================
</TABLE>
<TABLE>
<S> <C>
Borrower: OPTIMUMCARE CORPORATION (TIN: 33-0218003) Lender: SOUTHERN CALIFORNIA BANK
30011 IVY GLENN DRIVE #219 ORANGE COUNTY CORPORATE BANKING
LAGUNA NIGUEL, CA 92677 P.O. BOX 588
LA MIRADA, CA 90637
==================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (0.500% over WALL STREET JOURNAL PRIME RATE,
making an initial rate of 8.250%), Revolving Line of Credit Loan to a
Corporation for $1,500,000.00 due on May 1, 2000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
Personal, Family or Household Purposes or Personal Investment
---
X Business (Including Real Estate Investment).
---
SPECIFIC PURPOSE. The specific purpose of this loan is: Short term working
capital needs.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $1,500,000.00 as follows:
Undisbursed Funds: $1,500,000.00
Amount paid on Borrower's account: $0.00
-------------
Note Principal: $1,500,000.00
=============
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $3,750.00
$3,750.00 Loan Fee
---------
Total Charges Paid in Cash: $3,750.00
=========
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED APRIL 27, 1999.
BORROWER:
OPTIMUMCARE CORPORATION
By: EDWARD A. JOHNSON
----------------------------
EDWARD A. JOHNSON, PRESIDENT
5
<PAGE> 1
EXHIBIT 10.116
LEASE AMENDMENT
That certain OFFICE BUILDING LEASE dated June 23, 1988 and amended on September
27, 1989, September 24, 1990, July 7, 1992, June 5, 1995, April 30, 1996, May
19, 1997 and September 5, 1997 and May 14, 1998 by and between LAGUNA NIGUEL
OFFICE CENTER, a California Limited Partnership, as Landlord and OPTIMUMCARE
CORPORATION, a Delaware Corporation, as Tenant, is hereby amended as follows:
1) Lease shall be extended for a period of one (1) year. New
expiration date shall be June 30, 2000.
2) Rental rate shall increase to $2,010.00 per month effective July
1, 1999.
3) Landlord shall clean carpets at Tenant's request, at Landlord's
expense.
4) All other terms and conditions of the original lease shall remain
the same.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of May
12, 1999.
LAGUNA NIGUEL OFFICE CENTER OPTIMUMCARE CORPORATION
a California Limited Partnership a Delaware Corporation
BY: CARL J. GREENWOOD BY: EDWARD JOHNSON
---------------------------------- -------------------------
Carl J. Greenwood, General Partner Edward Johnson, President
(Landlord) (Tenant)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 137,841
<SECURITIES> 0
<RECEIVABLES> 2,727,712
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,017,164
<PP&E> 47,602
<DEPRECIATION> 153,154
<TOTAL-ASSETS> 3,499,896
<CURRENT-LIABILITIES> 555,806
<BONDS> 0
0
0
<COMMON> 5,920
<OTHER-SE> 2,431,761
<TOTAL-LIABILITY-AND-EQUITY> 3,499,896
<SALES> 2,698,476
<TOTAL-REVENUES> 2,707,262
<CGS> 2,020,235
<TOTAL-COSTS> 2,426,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 280,385
<INCOME-TAX> 128,375
<INCOME-CONTINUING> 152,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152,010
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
